Biofuel Market Update - GrainFuel Nexus ®

The global biofuel market is experiencing dynamic shifts influenced by policy decisions, strategic investments, and evolving supply-demand dynamics.

Global Supply and Demand Dynamics

The global supply of biofuels, encompassing ethanol and biodiesel, is projected to rise from 2.5 million barrels per day (mb/d) in 2021 to 4.4 mb/d by 2045. This growth is driven by increased adoption of renewable energy sources and supportive governmental policies.

The U.S. remains a significant consumer of biofuels, with policies such as the Renewable Fuel Standard (RFS) promoting ethanol and biodiesel usage. Collaborative efforts between oil and biofuel industries are underway to advocate for enhanced renewable fuel volumes in future mandates.

The EU's commitment to sustainability has led to increased demand for biofuels, particularly biodiesel and sustainable aviation fuel (SAF). Mandates requiring a minimum SAF usage at airports are set to boost demand further.

Asia-Pacific Countries like China and Singapore are emerging as key players in the biofuel market. China's exports of used cooking oil (UCO) have reached record highs, catering to global biodiesel production needs. Singapore's strategic investments in refining capacity underscore its role as a regional biofuel hub.

China's UCO Export Surge

In 2024, China's exports of used cooking oil (UCO) reached an unprecedented 2.951 million metric tons, marking a 43.49% year-on-year increase. This surge is attributed to heightened demand from the United States, European Union, and Singapore.

The increased availability of UCO is pivotal for biodiesel production, especially in regions aiming to meet renewable energy targets. However, this trend also raises concerns about feedstock sustainability and supply chain integrity.

As of February 21, 2025, biofuel prices exhibit regional variations influenced by feedstock availability, production costs, and policy impacts.

Biofuel	Export	Import	Price USD PER M/T
Ethanol	USA	Canada	650
Ethanol	Brazil	European Union	620
Biodiesel	Argentina	European Union	1,045
Biodiesel	Indonesia	China	980
Biomethanol	Netherlands	United Kingdom	1,110

_{Note: Prices are indicative and subject to market fluctuations.}

Supply Challenges A notable conflict has emerged between airlines and energy companies regarding the adoption of SAF. Airlines advocate for increased SAF usage to meet net-zero emission targets but face challenges due to high costs and limited supply. Conversely, energy companies are hesitant to scale up SAF production without long-term commitments from airlines, creating a bottleneck in the transition to greener aviation fuels

Investment Opportunities Addressing the current supply-demand imbalance through strategic partnerships and long-term contracts could facilitate market growth. Investors are encouraged to explore ventures that enhance SAF production capabilities.

Global investment firm KKR has acquired an additional 5% stake in Eni's biofuel subsidiary, Enilive, for €587.5 million, increasing its total ownership to 30%. This investment reflects growing confidence in the biofuel sector and supports Eni's decarbonization initiatives.
UK and Japan's Bioenergy Expansion: Both countries are planning significant expansions in bioenergy capacity, which may pose environmental concerns due to potential deforestation.
Oil refiners are increasingly integrating renewable feedstocks, such as used cooking oil, into their production processes to meet the rising demand for cleaner fuels. This transition necessitates the use of advanced catalysts to address impurities in bio-feedstocks, indicating a shift towards more sustainable refining practices.

Record Imports Singapore is set to import approximately 6.7 million barrels of diesel in February 2025, marking a two-year high. This surge is attributed to sellers directing cargoes to Asia's key oil storage hub amid weak demand elsewhere. Conversely, diesel exports from Singapore are expected to hit a one-year low at approximately 3.9 million barrels.The increased imports reflect shifting trade flows and may influence regional diesel pricing and supply strategies.

Traders should monitor these developments to identify potential arbitrage opportunities.

Investors should explore emerging opportunities in feedstock supply and refining capacity expansions

The biofuel market is currently navigating a complex landscape shaped by evolving policies, shifting trade flows, and increasing sustainability demands. While supply continues to expand, driven by growing UCO exports and strategic investments, challenges persist in balancing cost, infrastructure development, and regulatory compliance.

Trade Opportunities: Biofuel demand is rising in Europe and Asia, with SAF and biodiesel gaining traction.

Policy-Driven Dynamics: The impact of U.S. and EU renewable fuel mandates, alongside Asia’s growing biofuel import appetite, is expected to shape trade flows in 2025.

Pricing Trends: The biodiesel market remains volatile due to policy shifts and feedstock availability.

Price monitoring and strategic hedging remain crucial.

Upcoming Shipments: Increased diesel imports into Singapore signal a potential arbitrage window for traders, with price-sensitive markets in Southeast Asia and China closely watching developments.

_{GrainFuel Nexus® Key Recommendations}

Monitor Policy Developments: Track potential changes in EU blending mandates and U.S. RFS updates.

Engage in SAF Contracts: With increased mandates, airlines may seek long-term agreements, providing stable margins.

GrainFuel Nexus® will continue to provide real-time updates as new trends emerge.

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